Legal Framework and National Policy of Geothermal Development in Iceland

Abstract

In this paper, a brief description is given of the national policy, legal framework and official monitoring of geothermal resources in Iceland. It is the policy of the Government of Iceland to increase the utilisation of the energy resources, e.g. to fuel the transport sector, in harmony with the environment. The Master Plan for hydro and geothermal energy resources in Iceland will categorise and evaluate the impact possible power projects can have on the economy and environment. Three major amendments have recently been made to the energy legal framework in Iceland: (1) Ownership of resources cannot longer be sold by the state or municipalities although utilisation rights can be leased to a developer for up to 65 years with a possibility of extension. Royalties for the utilisation are determined by the Prime Minister. (2) Producers of electricity compete on an open market in Iceland. Therefore CHP power plants are obliged to keep separated accounts for heat and power production to prevent cross subsidisation of electricity. (3) Orkustofnun can grant licenses on behalf of the Minister of Industry. Geothermal energy plays an important role in providing the nation with clean and reliable energy and is fundamental to the Icelandic economy as well as Icelandic welfare and independence. Effective policy making and official monitoring of geothermal development for sustaining a renewable energy society in Iceland is crucial for sustaining a long-term lifespan of the resource.